Essar Shipping: Of cabotage and level playing fields

India might have the world’s fastest growing big economy at the moment, but its shipping scene is lagging far behind, argues the CEO of one of the nation’s largest shipowners.

“The primary reason behind this discrepancy is the fact that cabotage is practised elsewhere, while the concept of cabotage is conspicuous by its absence in India,” Ranjit Singh, the CEO of Essar Shipping, tells Maritime CEO.

What India does have is the right of first refusal (RoFR) wherein Indian fleet owners have the option of matching the lowest bid for carrying cargo. Traditionally the lowest bids for carrying Indian cargo have always been quoted by foreign vessels.

“The rates they can offer are practically dumping rates since these vessels want to make whatever money they can instead of returning empty on their backhaul trip,” Singh claims, while also pointing out they also do not have to pay tax in India.

With New Delhi contemplating relaxing RoFR norms Singh is threatening that he and his peers will reflag their ships elsewhere.

At present, not even 10% of domestic cargo is carried on local shipping lines.

Essar handled 13.06m tonnes of cargo in the previous financial year. The company is set to increase capacity from 15m tonnes to 25m tonnes by 2020.

Essar operates a fleet of 13 ships—mostly bulk carriers—comprising one capesize, six mini capes, one panamax, two supramaxes, and two handymaxes as well as one VLCC. Further ships will be added, Singh says, as and when the right opportunities arise. Where these new ships will be registered however would appear to be in the hands of the Indian government.